Which One of the Following Statements Represents an Advantage of the P

question 205

Multiple Choice

Which one of the following statements represents an advantage of the P system over the Q system?

• A) Less safety stock is carried to achieve the same service level.
• B) The replenishment intervals can be more easily individualized for items.
• C) Orders can be more easily combined to the same supplier.
• D) A P system is more suitable for quantity discounts and capacity limitations.

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Definitions:

Variable Costing

An accounting method that only allocates variable costs to inventory, treating fixed costs as expenses of the period.

Absorption Costing

A method of costing that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.

Operating Income

Operating income is the profit realized from a company's regular business operations, excluding deductions of interest and taxes, as well as any gains or losses from non-operating activities.

Direct Costing

A cost accounting method where only variable costs (direct materials, direct labor, variable manufacturing overhead) are included in product costs, fixed overhead costs are expensed in the period they are incurred.